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Do I owe capital gains on marital home?

Married bought house in 1999 for $126K. Divorced in 2007 Refinanced home in my name  for $350K paid ex $50K still owe 50K plus 5% interest. Selling now and have a contract on home for $338K. How do I figure out my cost basis for capital gains? if any? He will get entire proceeds of sale.

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5 Replies

Do I owe capital gains on marital home?

Who is the legal owner (on the deed).  Why is ex getting all the proceeds?  Who has been living in the home since the divorce?

Do I owe capital gains on marital home?

I am legal owner and lived in house entire time. Ex gets proceeds as has paid for multiple upgrades on property and the amount owed to him is 50K plus 5% compound interest which is close to proceed amount

Do I owe capital gains on marital home?

Ex is not getting all the proceeds ... when poster refinanced they paid out $50K to the ex and still owes $50K + interest for the remainder of the buyout.

So if that is the case ...

original purchase price was $126 ... 1/2 is poster's = $63K + $50K + $50K + interest (to buy out ex) ... so basis = $163 + interest

Selling price  is $338K -  ( basis + cost to sell ) = profit

So if the profit is less than $250K you will owe no taxes on the sale.

Do I owe capital gains on marital home?

If there were improvements made while you owned the property then you can add them to the basis also but at this time there is no taxable profit to report on the sale of the home so why bother.   It may be that once you satisfy the mortgage & the payout to the ex you will have nothing left over ... but that is immaterial for income tax purposes.

Do I owe capital gains on marital home?

Since you are the only owner, we look at your basis and your exclusion only.  (If you were joint owners this would be calculated differently.)

Your basis is either $63K plus $50K; or $63K plus $100K.  The amount you paid to buy out your ex is added to your original basis.  Assuming that you have a legal debt for the other $50K that wasn't paid yet, you can add the full $100K to your basis even though it wasn't actually paid in money.  (Just as you get credit for the full $63K in original purchase price even though you probably put 10-20% down and financed the rest.)  I disagree with the above about the interest—don't think the interest you owe adds to your basis.

As mentioned above, your capital gain is 338K minus your basis of $163K = $175K.  Since you lived in the home as your main home for at least 2 years of the past 5 years, you can exclude the first $250K of gain from taxation, so you won't owe any federal capital gains tax.  You don't even have to report the sale on your tax return unless you get a form 1099-S at the closing.

If you needed to reduce your gain calculation, you can adjust your basis by the cost of any permanent improvements and certain non-deductible closing costs from 1999 like inspections and surveys; and you can reduce the selling price by the commission and by legal fees, inspections, and other selling costs that you pay (but not repairs, painting, etc.)  Although, since your gain is less than the $250,000 exclusion, accounting for these items probably won't make a difference.

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